Tobacco Stocks Fall as India Imposes New Tax on Cigarettes

Gold Flake manufacturer and market leader ITC fell by 4.4%, while Marlboro’s distributor in the country, Godfrey Phillips India, fell by 7.7%.

ITC shares were trading at Rs 385.25, their lowest level since June 2024, and were heading for their worst day since February 2022.

ITC was the biggest loser in the Nifty 50 index and also led declines in the FMCG index, falling 1.6%.

The finance ministry late Wednesday notified excise duty of 2,050-8,500 rupees ($22.82-94.60) per 1,000 sticks, depending on cigarette length, effective Feb. 1.

Smoking-related health problems are seen as a major drain on India’s resources, and the government has taken steps to reduce consumption, including larger warning labels and periodic tax adjustments.

Analysts at ICICI Securities said the duty would mean a 22-28% increase in the overall costs of 75-85mm cigarettes.

“Cigarettes longer than 75mm account for roughly 16% of ITC’s volume and are likely to see a price increase of 2-3 rupees per cigarette as a result of the tax,” they said.

The new tax will be imposed in addition to the existing 40% Goods and Services Tax, the order stated.

The announcement comes after the government approved the Central Excise (Amendment) Bill 2025 in December, which replaces the interim tax on cigarettes and tobacco products.

Although the government has not specified the impact of the tax change on retail prices, analysts say higher taxes could prompt companies to raise prices.